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TMI Blog2018 (6) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... against the order of Commissioner (Appeals) who has set aside the penalty imposed under section 76 of the Finance Act, 1994. 2. On behalf of the assessee, the ld. counsel Shri V. Ravindran submitted that the period involved in ST/200/2010 is from April 2007 to December 2008 and in Appeal No.ST/41166/2015, the period involved is from January 2009 to September 2010. The assessee had constructed 71 flats and was using his own staff and labour for the construction activity. The assessee has not engaged any contractor / builder / developer for the construction work. Therefore, as per circular F.No. 332/35/2006 dated 1.8.2006, the activities would not fall under construction of residential complex services. The flats were built on the land belonging to the assessee and since no other contractors were hired, the same would be excluded from the definition of construction of residential complex service as it would amount to a self-service for which there can be no levy of service tax. The said aspect has been explained by the Board vide circular No. 96/7/2007-ST dated 23.8.2007. It was further clarified and explained vide Board circular dated 29.1.2009. Therefore the levy of service tax f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer. The subsequent agreement for construction has allowed the promoter-assessee to carry out the construction work on behalf of such land owners / prospective buyers. Thus the assessee not being the owner of the land, the circulars are not applicable to the facts of the case. Only as a trade practice prevalent in the construction industry, the promoter/assessee has obtained the planning and building permits for construction of residential flats in his name, though the UDS has been sold to the prospective flat buyers. Thus the assessee has agreed to construct the flats for the individual purchasers of the UDS of land and activity of such construction is fully covered under construction of residential complex service. Thus, the confirmation of demand requires no interference. 5. Heard both sides. 6. For better appreciation, the definitions are reproduced as under:- "Residential Complex Section 65(105)(zzzh): Taxable service means any service provided or to be provided to any person, by any other person, in relation to construction of complex; Section 65[(30a) "construction of complex" means - (a) construction of a new residential complex or a part thereof; or (b) completion a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction would not attract levy of service tax. Again vide circular dated 29.1.2009, the Board has explained that it is usual that initial agreement is entered between the promoter / builder and the prospective buyer, which is in the nature of agreement to sell the UDS in the property. This by itself does not create any interest or charge on such property. The property remains in the ownership of the promoter / builder and therefore when construction of residential complex is undertaken in such land, being self-service, it would not attract levy of service tax. For better appreciation, relevant portion of the circulars are reproduced as under:- Sl. No. Issue Legal Position 1. Is service tax applicable on Builder, Promoter or Developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lacs in one P/Y? In a case where the builder, promoter or developer builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of such residential complex, the contractor shall be liable to pay service tax on the gross amount charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. Board‟s Circular No. 108/2/2009-S.T., dated 29-1-2009 "3. The matter has been examined by the Board. Generally, the initial agreement between the promoters/builders/developers and the ultimate owner is in the nature of "agreement to sell". Such a case, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of "self-service" and consequently would not attract service tax. Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter/builder/developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee is the land owner and the construction done by himself without engaging a contractor would amount to self-service. Needless to say that the Board circulars are binding upon the department. The period after 1.7.2010 is to be analyzed in the background of the amendment to Section 65(105)(zzzh) of the Finance Act. The Explanation added to the said Section is reproduced as under:- "(zzzh) to any person, by any other person, in relation to construction of complex;] Explanation. - For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorised by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer" 9. The amendment brought to effect a deeming fiction, that if any sum is received from the prospective buyer before grant of completion certificate woul ..... 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